Natrol Announces Third Quarter Earnings

CHATSWORTH, Calif.--(BUSINESS WIRE)--Nov. 14, 2002--Natrol, Inc. (Nasdaq:NTOL), a manufacturer and distributor of nationally branded dietary supplements, today reported results for the third quarter ended September 30, 2002, announcing a net loss of $282,000 on net sales of $18.0 million. Included in the loss were expenditures of $405,000 which were made by the Company to commence the launch of its new multi-level marketing division, Annasa, Inc. No revenue was generated by Annasa in the third quarter of 2002 and fourth quarter revenue in 2002 from Annasa is expected to be nominal as the multi-level marketing Company prepares to expand nationally in the first quarter of 2003.
Net sales decreased 11.5%, or $2.4 million, to $18.0 million for the three months ended September 30, 2002 from $20.4 million for the three months ended September 30, 2002. Operating income for the third quarter amounted to $88,000 prior to the investment in Annasa. After the investment in Annasa, the Company incurred an operating loss of $317,000 vs. operating income of $1.8 million in the third quarter of the prior year.

Net sales for the nine months ended September 30, 2002 amounted to $53.4 million, 9.0% less than the $58.7 million in net sales reported during the same period in 2001. The Company incurred a net loss of $220,000 for the nine months ended September 30, 2002 as compared to net income of $2.6 million for the nine months ended September 30, 2001.

"Our quarter to quarter top and bottom lines in 2002 have been relatively stable and our cash flow has been excellent," said Elliott Balbert, Natrol's Chairman and CEO. "Despite having heavily invested in a state-of-the-art SAP computer system and our investment in Annasa we finished the third quarter of 2002 with $5 million more in cash than we began the year and net borrowing has not increased. We believe our investments will reap us significant benefits in the years to come. With respect to our core business, we have been working with our major customers to rationalize our inventory to take better advantage of growth categories such as women's products, heart health and weight loss. As a result, despite the published financial numbers, we feel we are, in many ways, a stronger business than we were at this time last year. Our challenge is to translate that strength into visible earnings improvement."

The statements made in this press release which are not historical facts including statements regarding expectations for future growth of revenue and profits and trends concerning net sales, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. As a result of a number of factors, including the factors described above that Natrol may not currently foresee, Natrol's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause Natrol's actual results to differ materially from those set forth in the forward-looking statements include adverse trends in the dietary supplements industry, intense competition, adverse effects of unfavorable publicity regarding particular products or the Company's industry generally, the Company's dependence on the introduction of successful new products, the Company's ability to gain market share and shelf space in each of its distribution channels, the Company experiencing high rates of product returns, and adverse government regulation, as well as those factors set forth under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2001 and in the Company's other filings with Securities and Exchange Commission.

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